The FTSE surged higher on Tuesday, lifted by indications that the global slowdown could be starting to ease. Financials led the charge, whilst the Brexit weakened pound also offered support to the UK index.
The FTSE was trading over 1% higher at a 6-month peak.
Stronger Chinese and US manufacturing figures in the previous session helped restore confidence in the global economy. Fears of a slowdown have lingered over the markets for months. A doubling down on dovish rhetoric by the Fed and other central banks across the globe intensified these fears. However, factory activity picking up by more than expected in the world’s two largest economies dulled those concerns at least for the European session.
Brexit paralysis hits pound
The pound was trading 0.5% lower as Brexit uncertainty continues to hit demand. After Parliament failed to agree on a way forward for Brexit for a second time on Monday, the political deadlock remains.
The only reason that the pound hasn’t fallen further today is because MP’s are pushing to move avoiding a no-deal Brexit into law. Parliament has already signalled that it does not want a no deal Brexit. However, the vote was not legally binding. A group of cross-party ministers are now trying to move this into law, to prevent the UK from leaving the EU without a deal.
A weaker pound is supportive to the FTSE thanks to the multinationals on the UK index which earn profits abroad. These firms are lifted by the more beneficial exchange rate.
Theresa May is due to give a speech shortly on Brexit, after an 8-hour cabinet meeting. Should the speech boost the pound the FTSE could come under pressure.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.